Dbt Yuma LLC v. Ycaa

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
DBT YUMA LLC, et al.1
Plaintiffs/Appellants,
v.
YUMA COUNTY AIRPORT AUTHORITY,
Defendant/Appellee.
No. 1 CA-CV 17-0735
FILED 2-5-2019
Appeal from the Superior Court in Yuma County
No. S1400CV201001309
The Honorable John P. Plante, Judge
AFFIRMED
COUNSEL
Williams, Mestaz, LLP, Phoenix
By Daryl M. Williams
Counsel for Plaintiffs/Appellants
1 On the court's own motion, it is ordered amending the caption in this
matter as reflected in this decision. The above-referenced caption shall be
used on all further documents filed in this matter.
Kutak Rock, LLP, Scottsdale
By Paul S. Gerding, Jr., Marc R. Lieberman, Michael W. Sillyman
Co-Counsel for Defendant/Appellee
Benesch & Davy, PC, Yuma
By Wayne C. Benesch
Co-Counsel for Defendant/Appellee
MEMORANDUM DECISION
Presiding Judge Diane M. Johnsen delivered the decision of the Court, in
which Judge Michael J. Brown and Judge Jennifer M. Perkins joined.
J O H N S E N, Judge:
¶1 DBT Yuma, LLC, et al. appeal the superior court's judgment
in favor of the Yuma County Airport Authority ("YCAA") following a
bench trial on various contract claims and cross-claims. For the following
reasons, we affirm.
FACTS AND PROCEDURAL BACKGROUND
¶2 YCAA operates the Yuma County airport. Beginning in mid-
2008, YCAA entered into four leases with DBT Yuma, LLC, and other
companies collectively doing business as Lux Air. The leases authorized
Lux Air to use space at the airport to run a fixed-base-operator business
refueling airplanes.
¶3 Under the leases, Lux Air had to pay monthly rent and fuel-
flowage fees. Each lease also provided:
[YCAA] may cancel this Agreement, at any time, in the event
[Lux Air] shall:
A). Be in arrears in the payment of the whole or any part of
the rent, fees and/or charges due hereunder for a period of
ten (10) days after [Lux Air's] receipt of written notice from
[YCAA] of the failure.
¶4 On appeal, Lux Air concedes it was "never current [and] was
late 86% of the time" on its payments under the leases. On September 4,
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2009, Craig Williams, YCAA airport director, delivered a letter to Tim
Berger, Lux Air's managing partner, that stated in relevant part:
I am very concerned because Lux Air is seriously delinquent
in its obligations to [YCAA] under the terms of the [leases] . .
. . I have enclosed an accounting of the delinquent balances
to this letter.
My Board of Directors is also very concerned because under
the [leases], [YCAA] is entitled to terminate the [leases], in the
event [Lux Air] is in arrears in the payment of the whole or
any part of the rent, fees and/or charges due under the
[leases] for a period of ten (10) days after [Lux Air's] receipt
of written notice from [YCAA] of the failure.
Accordingly, this letter is to formally give Lux Air notice of
its failure to make payments as more particularly described
[on an attachment listing delinquencies].
* * *
[YCAA] is prepared to extend the ten (10) day cure period
until October 1, 2009, upon the following terms and
conditions:
1. Payment of the sum of . . . ($20,001.21) to [YCAA] before
the close of business on Friday, September 4, 2009.
2. The payment of the sum of . . . ($20,001.21) as additional
rental on or before October 1, 2009, together with the payment
of an additional sum of . . . ($10,000.00) as a reduction of the
obligations set forth [on the attachment]. This additional
payment to continue each month until all financial obligations
are current.
3. Payment in full of all fuel flowage payments due at the time
required in the above referenced four (4) leases.
* * *
5. In the event Lux Air fails to meet any of the terms or
conditions set forth herein, [YCAA] may immediately
proceed to exercise all of its remedies under the [leases],
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without further notice to Lux Air, notice having been given
by this letter.
As we discussed, if you agree to the above stated terms and
conditions, please sign below indicating the concurrence of
Lux Air and the cure period will be considered extended until
October 1, 2009. If you do not sign and return this letter
indicating Lux Air's concurrence by the close of business on
Friday, September 4, 2009, this shall be considered your ten
(10) day notice under the terms of the [leases]. Tim, I hope
this extra time will help you reach your goals and close the
bond issue that your team has been working on so diligently.
But beyond this I cannot go.
¶5 Berger returned the signed letter on September 8, the next
business day after September 4. Lux Air made its next fuel flowage
payment on time in compliance with condition three of the letter, but failed
to pay rent on October 1 as required by condition two. On October 23,
YCAA terminated the leases and evicted Lux Air from the airport.
¶6 Lux Air sued YCAA, alleging breach of the lease agreement
and breach of the covenant of good faith and fair dealing. YCAA filed a
counterclaim alleging breach of contract and breach of the covenant of good
faith and fair dealing. The superior court held a 27-day bench trial, after
which it found Lux Air materially breached the leases, the September 4
letter was effective as a notice of default and no further notice of default
was required, YCAA did not waive any of Lux Air's breaches, and YCAA
had the right to evict Lux Air due to Lux Air's material breach. The court
awarded $998,516 in damages to YCAA, plus $701,040.61 in prejudgment
interest, $2,580,689.77 in attorney's fees and $625,311.95 in costs, along with
prejudgment interest.
¶7 The court entered judgment pursuant to Arizona Rule of Civil
Procedure 54(c), and Lux Air timely appealed. We have jurisdiction
pursuant to Article 6, Section 9, of the Arizona Constitution, and Arizona
Revised Statutes ("A.R.S.") sections 12-120.21(A)(1) (2019) and -2101(A)(1)
(2019).2
2 Absent material revision after the relevant date, we cite the current
version of a statute or rule.
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DISCUSSION
A. Standard of Review.
¶8 In reviewing a judgment entered after a bench trial, "[w]e will
not set aside the . . . court's findings of fact unless clearly erroneous, giving
due regard to the opportunity of the court to judge the credibility of
witnesses." In re Estate of Zaritsky, 198 Ariz. 599, 601, ¶ 5 (App. 2000). "A
finding of fact is not clearly erroneous if substantial evidence supports it,
even if substantial conflicting evidence exists." Kocher v. Dep't of Revenue,
206 Ariz. 480, 482, ¶ 9 (App. 2003). "We are not bound by the trial court's
conclusions of law and are free to draw our own conclusions of law from
the facts found by the trial court." Ariz. Bd. of Regents v. Phoenix Newspapers,
Inc., 167 Ariz. 254, 257 (1991). We review the record "in the light most
favorable to sustaining the trial court's ruling." Swichtenberg v. Brimer, 171
Ariz. 77, 82 (App. 1991).
B. Extension of Cure Period.
¶9 As noted, each of the leases granted YCAA the power to
cancel if Lux Air failed to cure a breach after ten days' written notice. The
September 4 letter listed Lux Air's existing breaches and cited the
cancellation provision but did not demand that Lux Air cure the breaches
within ten days. Instead, YCAA stated that it was "prepared to extend the
ten (10) day cure period until October 1, 2009," upon specified conditions.
The letter continued, "if you agree to the above stated terms and conditions,
please sign below indicating the concurrence of Lux Air and the cure period
will be considered extended until October 1, 2009." Further, the letter stated
that if Lux Air did not "sign and return" the letter by the close of business
on September 4, "this shall be considered your ten (10) day notice under the
terms of the" leases. The superior court found that Berger's signature bound
Lux Air to the terms of the September 4 letter, under which Lux Air had
until October 1 to cure or face cancellation.
¶10 Whether an agreement has been created is a question of fact.
AROK Const. Co. v. Indian Const. Servs., 174 Ariz. 291, 295 (App. 1993).
Although an acceptance must comply with the requirements of the offer,
"inconsequential variations [in the acceptance] . . . may be within the scope
of the offer." See Restatement (Second) of Contracts § 58, cmt. a (1981).
Generally, we favor enforcing agreements "when it is clear that the parties
intended themselves to be bound." AROK, 174 Ariz. at 297. Under
Arizona's "realist view" of contracts, "[i]f the parties have concluded a
transaction in which it appears that they intend to make a contract, the court
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should not frustrate their intention if it is possible to reach a fair and just
result." Id. (quotation omitted).
¶11 Lux Air argues it failed to strictly comply with the September
4 deadline to sign and return the letter and also did not strictly comply with
the letter's requirement that it pay $20,001.21 in rent by close of business on
September 4. Instead, Lux Air returned the signed letter the next business
day after September 4 and the payment it made was short of the stated
amount by $580.74. Lux Air argues that signing and returning the letter no
later than September 4 and making a rent payment of $20,001.21 were
conditions of its acceptance, and when it failed to sign and return the letter
on time and failed to pay the precise amount demanded, it did not satisfy
those conditions.
¶12 The superior court did not err by finding that Lux Air
accepted YCAA's offer to extend the deadline to October 1. Although
Berger did not return the letter on September 4 as the letter required, Lux
Air's conduct – Berger signed and returned the letter the next business day,
along with a payment that was barely short of the required amount – shows
it intended to be bound by the terms of the letter. From YCAA's
perspective, Lux Air's variation in acceptance was inconsequential because,
as Williams testified, the amount Lux Air paid was "good enough" and a
"good faith effort on their part to meet that requirement, so . . . I accepted
that amount at that time and . . . extended the cure period to October the
1st." Both parties' subsequent conduct further supports the superior court's
finding: Lux Air made its next fuel flowage payment on time, as the letter
required, and YCAA did not declare a default until after Lux Air missed the
payments due under the letter agreement on October 1. Although Lux Air
points out that the court found that Berger failed to appreciate the
significance of the letter, that does not undermine his assent on behalf of
Lux Air to the letter's terms. See Hill-Shafer P'ship v. Chilson Family Tr., 165
Ariz. 469, 474 (1990) ("[M]utual assent is based on objective evidence, not
on the hidden intent of the parties.").
C. Materiality of the Breach.
¶13 Lux Air next challenges the superior court's finding that it
materially breached by failing to make the October 1 rent payment on time.
¶14 When it comes to commercial leases, a "landlord's right to
terminate is not unlimited," and a "court's decision to permit termination
must be tempered by notions of equity and common sense." Foundation
Dev. Corp. v. Loehmann's, Inc., 163 Ariz. 438, 446 (1990). A landlord may
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terminate a lease only for a material, non-trivial breach. Id. at 445-46. The
Loemann's court held that in determining whether such a breach has
occurred, the factfinder must consider the following five factors:
(a) the extent to which the injured party will be deprived of
the benefit which [it] reasonably expected;
(b) the extent to which the injured party can be adequately
compensated [by damages] for the part of that benefit of
which [it] will be deprived;
(c) the extent to which the party failing to perform or to offer
to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer
to perform will cure [its] failure, taking account of all the
circumstances including any reasonable assurances; [and]
(e) the extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of
good faith and fair dealing.
Id. at 446-47 (quoting Restatement (Second) of Contracts § 241 (1981)).
¶15 The record shows the superior court applied both equity and
common sense, as instructed by Loehmann's, in concluding that Lux Air's
breach was material. Lux Air does not argue the superior court's findings
of fact on this issue are unsupported by substantial evidence. Instead, it
argues we should review de novo the court's finding that Lux Air committed
a material breach. Without meaning to imply that we would come to a
different outcome than the superior court on de novo review, we note that,
on a record such as this, whether a breach is material is a question of fact,
and we will affirm the superior court's finding if it is supported by
substantial evidence. See Maleki v. Desert Palms Prof'l Props., L.L.C., 222 Ariz.
327, 333, ¶ 27 (App. 2009) ("the record contains substantial evidence that
[appellee] did not materially breach the lease").
¶16 Substantial evidence supports the superior court's finding
that Lux Air materially breached the leases, thereby permitting YCAA to
cancel after October 1. The September 4 letter listed Lux Air's arrearages –
unpaid lease deposits from January 2009, unpaid rent from August and
September 2009, unpaid fuel flowage fees from August and other charges –
all of which totaled $55,935.32. Condition two of the letter required that, by
October 1, Lux Air pay $20,001.21 for that month's rent and $10,000 toward
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reducing the outstanding arrearages. There is no dispute that Lux Air failed
to pay these amounts (totaling $30,001.21) by October 1. This breach by Lux
Air gave YCAA the right to terminate the leases "without further notice" as
provided by the September 4 letter.
¶17 The record also shows that Lux Air failed to provide
reasonable assurances to YCAA that, having materially breached the leases,
it would cure its breaches: Williams testified that, as referenced in the
September 4 letter, Lux Air had told him it needed to obtain bond financing
to allow it to continue to pay its monthly obligations. Based on Berger's
assurances in a September 9 email, Williams believed that Lux Air was
"very close to finalizing all the details on [its] bond financing." But on
October 19, Berger admitted to Williams that Lux Air did not have "a deal
in hand on the financing." The record therefore supports the superior
court's finding that "[t]he excuses given convinced YCAA that Lux Air
probably lacked the ability to go forward as a going concern."
¶18 Lux Air argues the superior court erred in weighing the
equities by ruling that Lux Air was required to tender performance after
YCAA canceled the leases. Tender "is an offer to perform a contract, or to
pay money, coupled with a present ability to do the act." Somerton State
Bank v. Maxey, 22 Ariz. 365, 369 (1921) (quotation omitted). According to
Lux Air, tender was unnecessary as a matter of law because YCAA's
cancelation of the leases was irrevocable.
¶19 Contrary to Lux Air's contention, the superior court did not
rule that Lux Air should have tendered performance. It only found that
Lux Air "knew or should have known" that it could have cured the default
by tendering payment, but failed to do so. It further found that if Lux Air
had properly tendered payment on or before October 26, 2009, YCAA
"would have been bound by equity to accept" it. In any event, when tender
otherwise may be required, it is excused only "where it is clear that the other
party will not accept it." Kammert Bros. Enters., Inc. v. Tanque Verde Plaza Co.,
102 Ariz. 301, 306 (1967) (tender excused when seller "positively refused
[buyer's] offer to perform its duties under the contract"). Lux Air points to
no such evidence in the record here. See also Ceizyk v. Goar Serv. & Supply,
Inc., 21 Ariz. App. 119, 122 (1973) (tender not excused because sellers of land
never indicated to the buyer a positive refusal to perform).
¶20 Lux Air argues that some of the Loehmann's factors weigh in
its favor: As the superior court found, Lux Air had the ability to pay, the
termination was a "crushing blow" to the company that left it "with no
sources of income and much debt," and the "termination prevented Lux Air
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from realizing large profits." At the same time, however, as the superior
court found, Lux Air was at fault because Lux Air deliberately gave YCAA
the "mistaken impression" that it needed to complete the bond deal to allow
it to continue to perform its obligations under the leases.
¶21 A landlord that has given proper notice is entitled to demand
that a tenant pay rent in a timely fashion, and the record shows that after
Lux Air failed to make the payments due on October 1, it did not try to
show YCAA that it could come up with the money it owed. As the superior
court found, Lux Air "recklessly failed" to pay, when it should have known
that payment was required to avoid termination. In reviewing findings of
fact, "we do not substitute our judgment" for that of the superior court if
substantial evidence supports the court's decision. Great W. Bank v. LJC
Dev., LLC, 238 Ariz. 470, 478, ¶ 22 (App. 2015). This is so even when, as
here, the record also contains substantial conflicting evidence. See Kocher,
206 Ariz. at 482, ¶ 9.
D. Purported Waiver of Power to Evict.
¶22 Lux Air also argues YCAA waived the right to cancel the
leases by taking actions that were "inconsistent with the intention of
enforcing a forfeiture."
¶23 In Chadwick v. Winn, 101 Ariz. 533 (1966), the supreme court
acknowledged that, by its conduct, a landlord may waive the right to
declare a forfeiture. In that case, a tenant who had been persistently late in
paying rent testified he told the landlord he would pay "in a couple of
days," and the landlord consented. Id. at 535. Several days went by, and
after the tenant still had not paid, the landlord terminated the lease. Id. The
tenant sued and prevailed. Id. The supreme court affirmed, reasoning that
any
act of the lessor done with the knowledge of a cause of
forfeiture by the lessee affirming the existence of the lease and
recognizing the lessee as his tenant is a waiver of such
forfeiture. And inasmuch as forfeitures are not favored, slight
acts will be construed as a waiver of the forfeiture.
Id. at 536. The court reasoned that because the landlord had granted the
tenant an extension, he temporarily waived his right to declare a forfeiture
by putting the tenant "off guard"; before canceling the lease, the landlord
needed to make a demand and give the tenant a reasonable opportunity to
pay. Id. See also Kammert Bros., 102 Ariz. at 305 ("Once strict performance
of the contract has been waived as to timely payment, a clear and definite
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notice to buyer followed by allowance of a reasonable time to bring
payments up to date would be necessary in order to reinstate the forfeiture
clause of the contract.").
¶24 Relying on Kammert Bros. and on the "slight acts" language of
Chadwick, Lux Air argues YCAA waived its right to cancel the leases by,
among other actions, accepting payments, approving a sewer abandonment
project and communicating with Lux Air employees without informing
them that YCAA had decided to evict Lux Air after it failed to pay the rent
on October 1. The superior court fully considered this argument, but found
that "YCAA's acceptance from Lux Air of the rent payment and later the
fuel flowage payment after the September 4, 2009 letter was sent did not
constitute a waiver." Furthermore, the court found that "[u]pon missing the
October 1, 2009 payment, proper notice having been given, YCAA had the
right to terminate the lease" and that "[n]o actions of YCAA could
reasonably have led Lux Air officials to believe an extension of the
requirement to pay the sums required under the September 4, 2009 letter
was granted."
¶25 Substantial evidence supports the superior court's finding
that YCAA did not waive its right to terminate the leases upon Lux Air's
failure to comply with the terms of the September 4 letter. See Chaney Bldg.
Co., Inc. v. Sunnyside School Dist. No. 12, 147 Ariz. 270, 273 (App. 1985)
(whether party waived contractual notice requirement is a question for trier
of fact). Kammert Bros. and Chadwick teach that a party must put the other
on plain notice that it will declare a forfeiture upon the other's breach. Here,
and unlike in those cases, YCAA's September 4 letter did just that, formally
alerting Lux Air that "[i]n the event Lux Air fails to meet any of the terms
or conditions set forth herein, [YCAA] may immediately proceed to exercise
all of its remedies [including termination] under the [leases] without further
notice to Lux Air, notice having been given by this letter." See Kammert
Bros., 102 Ariz. at 305; Chadwick, 101 Ariz. at 536.
¶26 Lux Air's contention that YCAA waived its right to cancel by
accepting the interim payments required by the September 4 letter and
approving the sewer project is misplaced. In the September 4 letter, the
parties agreed that Lux Air would make certain interim payments due
before October 1 and would pay rent due on October 1. When Lux Air
began to perform its obligations under that agreement by making the
interim payments, YCAA was entitled to accept that performance in
accordance with the September 4 letter. Further, the superior court
thoroughly reviewed YCAA's actions after October 1 and its interactions
with Lux Air and found that nothing "could reasonably have led Lux Air
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officials to believe" that YCAA had agreed to extend the October 1 deadline.
"[G]iving due regard to the opportunity of the [superior] court to judge the
credibility of witnesses," we conclude that substantial evidence supports
the superior court's findings. See Zaritsky, 198 Ariz. at 601, ¶ 5.
E. Purported Breach of Covenant of Good Faith and Fair Dealing.
¶27 Lux Air further contends the superior court erred when it
ruled that YCAA did not breach the covenant of good faith and fair dealing.
Lux Air argues YCAA acted in bad faith when it "secretly" planned "behind
the back of its tenant to forfeit the tenant because it ha[d] changed its mind
about its revenue plan and want[ed] millions of dollars out of the FAA it
could not otherwise get."
¶28 Arizona law implies in every contract a covenant of good faith
and fair dealing that "prohibits a party from doing anything to prevent
other parties to the contract from receiving the benefits and entitlements of
the agreement." Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement
Masons Local No. 395 Pension Tr. Fund, 201 Ariz. 474, 490, ¶ 59 (2002).
¶29 The superior court thoroughly reviewed evidence of YCAA's
actions before finding that YCAA did not breach the covenant of good faith
and fair dealing. Although Lux Air asserts we should review the alleged
breach de novo, "[w]hether a party has breached the covenant of good faith
and fair dealing is a question of fact." Maleki, 222 Ariz. at 333, ¶ 28.
¶30 Substantial evidence supports the court's finding. Lux Air's
long history of delinquent payments justified YCAA's decision to develop
a contingency plan in case Lux Air shut down or otherwise failed to
perform on the September 4 letter agreement. As the superior court
correctly concluded, YCAA "had a right to take steps to ensure that the
airport could carry on fueling and other essential functions of the airport
once the leases were actually terminated." In fact, the law imposes a "duty
upon the [party] injured to exercise reasonable care to mitigate the injury,
according to the opportunities that may fairly be or appear to be within [its]
reach." S. A. Gerrard Co. v. Fricker, 42 Ariz. 503, 508 (1933). Based on weeks
of testimony, the superior court did not err in concluding that "Lux Air
failed to prove that any actions by Craig Williams or Gerald Hinkle Jr.
[YCAA's chief financial officer] were deceptive or unfair." Moreover,
although Lux Air objects to YCAA's delay in terminating the lease after the
October 1 breach, it failed to prove it suffered any prejudice as a result of
YCAA's delay.
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¶31 As noted, YCAA also provided Lux Air with notice and a
reasonable opportunity to cure in compliance with Chadwick and Kammert
Bros. before evicting Lux Air for its material breach as permitted under the
leases. Such "[a]cts in accord with the terms of one's contract cannot without
more be equated with bad faith." Wells Fargo, 201 Ariz. at 492, ¶ 65. Lux Air
contends that YCAA's so-called bad faith conduct continued after the
eviction and during this litigation. But any actions occurring after the
eviction cannot constitute actionable bad faith because a material breach by
one party relieves the other party from performance and discharges it from
the contract. Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124, 133, ¶ 33
(App. 2012).
F. Costs Award.
¶32 The superior court awarded YCAA costs of $625,311.95. In its
opening brief on appeal, Lux Air argues that $575,150.60 of the award
represented costs not allowed under A.R.S. § 12-332(A) (2019). In its reply,
Lux Air also argues that YCAA did not provide evidentiary support for the
costs.
¶33 The court must award taxable costs to the successful party in
a civil action. A.R.S. § 12-341 (2019). "Whether a particular expenditure
qualifies as a taxable cost is a question of law that we review de novo." Reyes
v. Frank's Serv. & Trucking, LLC, 235 Ariz. 605, 608, ¶ 6 (App. 2014). Taxable
costs are defined in § 12-332(A). In arguing that the bulk of the costs the
court awarded to YCAA were not taxable, Lux Air overlooks that § 12-
332(A)(6) allows the court to order reimbursement of other expenses "that
are made or incurred pursuant to . . . agreement of the parties."
¶34 As allowed by § 12-332(A)(6), the leases at issue here
expressly permitted the prevailing party in a litigation to recover "court
costs, costs of investigation, and other related expenses." Lux Air does not
identify any particular expense that it argues is not taxable under that
contract provision. In the absence of argument or citations to the record,
we will not parse the long list of expenses for which YCAA sought and
obtained an award. See ARCAP 13(a)(7). As for the adequacy of evidence
supporting the costs, Lux Air does not argue how the court erred by
accepting the affidavit YCAA provided in support of the costs.
G. Attorney's Fees.
¶35 Lux Air also argues the superior court erred by awarding
YCAA attorney's fees incurred by Kutak Rock, a law firm hired by YCAA's
insurer to defend YCAA. Lux Air argues YCAA and Kutak Rock did not
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have an attorney-client relationship and YCAA's insurer paid the law firm's
fees, not YCAA. We review an award of attorney's fees for abuse of
discretion. Orfaly v. Tucson Symphony Soc'y, 209 Ariz. 260, 265, ¶ 18 (App.
2004).
¶36 The superior court did not abuse its discretion in awarding
the fees. There is no dispute that Kutak Rock appeared on behalf of YCAA
in the litigation, and Lux Air does not challenge the reasonableness of the
fees incurred. Under these circumstances, we long have held that the court
may award fees incurred by a law firm hired and paid by an insurer on
behalf of its insured. Orfaly, 209 Ariz. at 267, ¶ 27; Catalina Foothills Ass'n,
Inc. v. White, 132 Ariz. 427, 428 (App. 1982) (contrary rule would "misdirect
the benefit derived through the foresight of the cautious individual who
procured insurance" and "would also discriminate against the insurance
company").
¶37 Lux Air argues that caselaw teaches otherwise, citing Moedt v.
Gen. Motors Corp., 204 Ariz. 100 (App. 2002). But Moedt, and the case on
which it relied, Lisa v. Strom, 183 Ariz. 415 (App. 1995), are not relevant to
the issue presented here. In Lisa, an attorney and his law firm had
represented the attorney and his wife in the litigation; we held fees could
not be awarded because the attorney and his wife were not obligated to
reimburse the firm for the work performed on their behalf. 183 Ariz. at 419.
In Moedt, we upheld a fees award to a plaintiff who had sued for breach of
a car warranty under statutes authorizing fees awards to prevailing parties.
204 Ariz. at 102, 104, ¶¶ 2-4, 14. Citing Lisa, the defendant argued that
because the plaintiff's lawyer was representing her on a contingent fee, a
fees award was improper because the plaintiff was not personally obligated
to pay the lawyer. Moedt, 204 Ariz. at 103, ¶ 10. We rejected that argument,
holding that the client's fee agreement was sufficient because it "created a
financial obligation" between herself and the law firm. Id. at 104, ¶ 12.
Neither case addressed the situation in Orfaly or Catalina Foothills, where we
upheld fees awards to compensate insurers that were financially obligated
to pay the lawyers they had retained to represent their insureds.
H. Prejudgment Interest.
¶38 In their pretrial statement, YCAA and Lux Air agreed to an
amount of damages to be awarded to YCAA if it prevailed. The parties also
stipulated in their pretrial statement that the prevailing party would be
entitled to interest, and, after ruling in favor of YCAA, the superior court
awarded YCAA prejudgment interest of $701,040.61 on damages of
$998,516. On appeal, Lux Air argues prejudgment interest was not proper
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because the damages were not liquidated, given that the stipulation in the
pretrial statement was "contingent upon the outcome of the case."
¶39 A litigant has a right to prejudgment interest on a liquidated
claim. Scottsdale Ins. Co. v. Cendejas, 220 Ariz. 281, 288, ¶ 32 (App. 2009). A
claim is liquidated if the litigant "provides a basis for precisely calculating
the amounts owed" so that, accepting the evidence, one can "calculate
exactly the amount of damages without relying on the opinion or discretion
of a judge or jury." Id. at 288, ¶ 33. We review de novo a superior court's
award of prejudgment interest. Id. at 288, ¶ 32.
¶40 Contrary to Lux Air's contention, any damage award is
"contingent upon the outcome of the case." The issue is whether the
damages were liquidated, which turns on whether, assuming a claimant
prevails on the merits, the amount of damages is ascertainable without
resort to opinion or discretion. See Cendejas, 220 Ariz. at 288, ¶ 33.
¶41 More generally, Lux Air argues that because the total
damages were stipulated, "there was no evidentiary basis to parse the
stipulated sum into components for purposes of assessing prejudgment
interest." Because the parties had stipulated to the total amount of damages
to which YCAA might be entitled, the superior court did not permit YCAA
to offer evidence in support of any of its damages. In its proposed findings
of fact and conclusions of law, however, YCAA itemized its various
damages, including unpaid rent and fuel flowage fees due under the leases,
storage fees YCAA incurred for the items Lux Air left behind after the
eviction, and the costs YCAA incurred in completing Lux Air's
unperformed lease obligations, including the construction of a new
terminal and removal of underground fuel storage tanks. Lux Air neither
contested YCAA's proposed findings and conclusions, nor did it file its own
proposed findings and conclusions.
¶42 With its post-trial application for fees and costs, YCAA sought
prejudgment interest and attached a table that specified the date on which
interest should begin to run for each category of damages. Lux Air did not
lodge any objection to YCAA's proposed prejudgment interest amounts,
nor did it argue that any of the categories of damages were unliquidated.
Further, on appeal, Lux Air does not identify any particular item of
damages that it contends was unliquidated. In any event, having failed in
the superior court to object that the damages were not liquidated, Lux Air
may not press the matter here. See Brown v. U.S. Fidelity & Guar. Co., 194
Ariz. 85, 88, ¶ 9 (App. 1998).
14
DBT YUMA LLC, et al. v. YCAA
Decision of the Court
¶43 Additionally, although Lux Air argues the court's calculation
of prejudgment interest has no support in the record, the detailed
calculations that YCAA provided to the superior court, to which Lux Air
did not object, amply support the court's award of prejudgment interest.
CONCLUSION
¶44 For the reasons set forth above, we affirm the superior court's
judgment in favor of YCAA. YCAA is entitled to its costs on appeal and, in
the exercise of our discretion, we award YCAA its reasonable attorney's fees
pursuant to A.R.S. § 12-341.01(A) (2019), contingent upon compliance with
Arizona Rule of Civil Appellate Procedure 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
15